Imagine you are the auditor at Acme Company (a large publicly traded company based in the United States), which intends to acquire another company for a price of 8.5 billion dollars, or 7.8 percent of Acme’s total assets.
The SEC has created materiality standard rule-of-thumb guidance (not a mandate or law) for mergers and acquisitions regarding reportable events. It states that mergers or acquisitions that exceed 5 percent of the acquiring company’s total assets should be registered with the SEC. So, technically, this acquisition is considered material and does not legally need to be registered. The question is, should it be?
Instructions
Consider the above scenario and address the following question:
From an ethical standpoint, would you advise registering this acquisition?
Write a three-page memo to your company leadership that explains your decision on whether or not to register the acquisition with the SEC. It should:
Explain your approach to answering the question of whether to file using sound reasoning that includes all critical areas that will inform the decision. Consider the following:
The criteria upon which you base your decision.
Ethical and professional reference points that guide you.
Possible ramifications for shareholders or other potentially interested parties.
State and justify your decision effectively using support from appropriate statutes, laws, or other ethical standards. Note: There is no right or wrong answer, but you must support your position.
Be sure your assignment meets the following requirements:
Three pages in length.
A minimum of three references from appropriate professional or academic sources.
There is no special formatting required for the memo, but it should be professionally composed and presented.
http://www.sec.gov/Archives/edgar/data/1190935/000119312517089955/d339590dex99r3.htm
https://www.sec.gov/interps/account/sab99.htm